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Shanghai stocks hit 7-week high after liquidity injection
By Hu Xiaocen |
May 4, 2012, Friday
|
Online Edition
Online Edition
SHANGHAI stocks advanced to a seven-week high after China's central bank yesterday executed seven-day reverse repurchase agreements to boost market liquidity. Market sentiment rose on speculation that the policy maker may take further steps to spur economy.
The Shanghai Composite Index added 0.49 percent, or 11.93 points, to 2,452.01, extending the weekly gain to 1.3 percent. Turnover stood at 102.4 billion yuan (US$16.2 billion).
The People's Bank of China injected 65 billion yuan into the interbank market yesterday through the reverse repurchase deals with selected banks. Under such arrangement, the central bank lends the capital to commercial banks with their bills as collaterals.
Central China Securities said in a report today, improved liquidity is fundamental to raising stock prices. Fiscal deposits declined and a number of government investment projects kicked off in April. Both indicate a stabilizing economy and an extended rally in the A-share market.
Market watchers said the operation signals a switch in monetary policy in the short run.
"Market liquidity is at a reasonable level at the moment, the unusual operation is aimed at replenishing short-term liquidity," said Shi Lei, analyst at Ping An Securities, on his microblog today.
Another analyst at China Merchants Bank, Liu Junyu, said, "A cut in reserve requirement ratio is the primary tool to stimulate credit growth. However, after the reserve repurchase, expectations for a further cut in reserve requirement evaporated."
Huatai Securities disagreed with Liu, saying, "the central bank will further cut the reserve requirement for commercial banks in the second quarter, because the reserve repurchase operation is not a substitute tool for ratio cut."
Lenders advanced on improved market outlook. The nation's biggest lender, Industrial and Commercial Bank of China, gained 0.5 percent to 4.38 yuan. China Construction Bank added 0.6 percent to 4.76 yuan, while China Merchants Bank, rose 0.5 percent to 12.41 yuan.
Meanwhile, fears for rising inflation in April also dampened the expectation for proactive easing by the government in the near future.
A number of research institutions said the Consumer Price Index may have risen between 3.2 percent and 3.5 percent year on year in April, a slower pace compared with 3.6 percent in March, but still at a high level, the Shanghai Securities News said today.
The Shanghai Composite Index added 0.49 percent, or 11.93 points, to 2,452.01, extending the weekly gain to 1.3 percent. Turnover stood at 102.4 billion yuan (US$16.2 billion).
The People's Bank of China injected 65 billion yuan into the interbank market yesterday through the reverse repurchase deals with selected banks. Under such arrangement, the central bank lends the capital to commercial banks with their bills as collaterals.
Central China Securities said in a report today, improved liquidity is fundamental to raising stock prices. Fiscal deposits declined and a number of government investment projects kicked off in April. Both indicate a stabilizing economy and an extended rally in the A-share market.
Market watchers said the operation signals a switch in monetary policy in the short run.
"Market liquidity is at a reasonable level at the moment, the unusual operation is aimed at replenishing short-term liquidity," said Shi Lei, analyst at Ping An Securities, on his microblog today.
Another analyst at China Merchants Bank, Liu Junyu, said, "A cut in reserve requirement ratio is the primary tool to stimulate credit growth. However, after the reserve repurchase, expectations for a further cut in reserve requirement evaporated."
Huatai Securities disagreed with Liu, saying, "the central bank will further cut the reserve requirement for commercial banks in the second quarter, because the reserve repurchase operation is not a substitute tool for ratio cut."
Lenders advanced on improved market outlook. The nation's biggest lender, Industrial and Commercial Bank of China, gained 0.5 percent to 4.38 yuan. China Construction Bank added 0.6 percent to 4.76 yuan, while China Merchants Bank, rose 0.5 percent to 12.41 yuan.
Meanwhile, fears for rising inflation in April also dampened the expectation for proactive easing by the government in the near future.
A number of research institutions said the Consumer Price Index may have risen between 3.2 percent and 3.5 percent year on year in April, a slower pace compared with 3.6 percent in March, but still at a high level, the Shanghai Securities News said today.
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